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Strategic management analysis and recommendation on Bank of Punjab
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Executive summary
This assignment is base on the Bank of Punjab. Which is one of the oldest bank in Pakistan. This
assignment is base on the PEST analysis, SWOT analysis. We have also talk about the five
forces model. Since Bank of Punjab is one of the oldest banks so there are some key success
factor and external factor evaluation matrix. This all assignment is done with the help of the
annual report and we have conduct a small interview with the employee of Bank of Punjab from
where we were able to get small amount of information.
Bank of Punjab
Established in 1989, in pursuance of The Bank of Punjab Act 1989 and was given the status of
scheduled bank in 1994. The Bank of Punjab is working as a scheduled commercial bank with its
network of 284 branches at all major business centers in the country. The Bank provides all types
of banking services such as Deposit in Local Currency, Client Deposit in Foreign Currency,
Remittances, and Advances to Business, Trade, Industry and Agriculture A wholly owned
subsidiary of BOP First Punjab Modaraba (FPM) was established in 1992 and is being managed
by Punjab Modaraba Services (Pvt) Ltd.
Vision statement
To be a customer focused bank with service of excellence.
Analysis
The vision statement of BOP is focusing on customers. BOP is only looking to build their
customers and for that they using different types of strategies. Likewise launching schemes,
provide interest on saving accounts. BOP has understood one thing that to be on the top they
should have more customer as compare to their competitors. So when BOP look in the future
they think themselves as market leader and to reach their BOP is focusing on the services which
they going to provide to their customer. BOP believes in the best so they are always looking to
provide excellence services to their customer.
Mission statement
To exceed the expectation of our stakeholders by leveraging our relationship with government of
Punjab and delivering a complete range of professional solutions with a focus on programmed
driven products and services in the agriculture and middle tier markets through a motivated team.
Analysis
The mission statement of BOP is totally base on their stake holder, government, customer,
professional, agriculture department and investing on individuals to starts their own business. As
we can see in last year BOP have launch different schemes like yellow cabs and
Women Entrepreneur's Finance Scheme. This shows the organization is help societies to improve
themselves. BOP is the semi government bank so in Punjab this bank is support by Punjab
government. If there is any work happening in Punjab the BOP will be involve in the projects.
This is the only bank which also supporting the agriculture sector in Pakistan. As we all know
that Pakistan is the agriculture country and BOP is the only bank that supports this department
and never the less BOP claim to provide all kinds of the solution for professional.
PEST analysis
Economic
•It appears that the economy will face tremendous challenges and some difficult decisions in
2008-09, as inflationary risks persist. The uptrend witnessed in CPI inflation during the last few
months is largely a result of continued rising food prices.
•Energy crisis is looming in the country, because of an increase in demand and a rather slow
improvement in supply.
•Economic instability prevailing in worldwide financial markets & investors are loosing their
confidence in banks
Technological
•Advanced computerized and control system
•Growing network of online branches throughout the country
•Strategic plan 2005-10 of SBP for all Pakistani banks ensures technological advancements in
the whole banking sector
Political-Legal
•Agriculture contributes to poverty reduction for vast majority of the poor live in rural areas.
Government has taken initiatives in agriculture and rural development.
•Government of Pakistan through SBP has provided backing to the banking industry by
decreasing cash reserve requirements (CRR) to 6% from 8%. This has provided liquidity to
banks worth Rs. 180 Billion
•Improvement in law and order and elimination of political unrest are very much imperative for
the Government in order to provide investment conducive environment to both local and foreign
investors.
Social cultural
•Visible chaos in society is prompting people to take out their investments &valuables from
banks as there are huge chances of banks’ liquidation
•The huge culture of opening bank accounts, investment making, and credit & debit cards now
seems to moving towards declining phase
Analysis of Strategic Factors (SWOT)
Strengths
•BOP is majority owned (51%) by the government of Punjab. It has an asset base of PKR165
billion & total deposits of PKR138 billion
•The bank’s management realizes the necessity of existence of effective internal controls to
ensure smooth operations in current technical and swift business environment.
•The bank has been proactive in adopting measures to monitor and mitigate risks associated with
banking industry. Bank has been meticulously following requirements necessitated under
Institutional Risk Assessment Framework (IRAF) questionnaire.
•Bank is fully committed to follow the timelines specified by the SBP in its Roadmap for
implementation of recommendations of Basel-II committee for Risk Measurement and
Management
•The financial statements, prepared by the management of the bank present fairly the state of
affairs, the results of its operations, cash flows and changes in equity.
Weaknesses
•Loosing profit indictor “Bank’s spread” & having negative profitability every year but is mainly
because the directors & President of BOP played scam with the bank by involving in a fraud of
billions of Rupees.
•Lack of proper internal controls came up when the credit scam was unleashed. The recipients of
the huge loans include owners of some companies that do not exist at all. In other cases, fake
identity cards were used and over-evaluated properties were pledged as collateral.
•Advertisement on electronic media has not been seen
•The State Bank of Pakistan (SBP) has expressed its great concern over the Bank’s “system and
controls”, terming them “quite weak”
Opportunities
•The year 2009 will prove to be another demanding year for the bank with scattered
opportunities and tough competition. Diversification, innovation admission driven approach are
the key to success which BOP should adopt
•Progressive but cautious business expansion with strategic branch network extension and
introduction of innovative products in all areas of business.
•BOP should emphasize much on e-banking
•Commencement of new schemes there can even be a greater increase in its deposits
Threats
•Economic growth is likely to be slow, as agricultural growth may slowdown due to lower
harvests of cotton and rice crop
•Adverse impact of “Credit Crisis” can adversely effect BOP
•Facing a strong competition by its competitors
•Deposit growth can slowdown due to lack of customer trust in Bop. Constraints Following are
the constraints for BOP
Porter five force model
Entry barriers
The Pakistani market is highly regulated by the government and also by the central bank. A lot of
decisions such as regularization of interest on loans and deposits as well as money supply Is
controlled by the state bank of Pakistan.
Rivalry among the existing competitor
When it comes to the banking sector in the country we could include in whole lot of public as
well as private banks along with NBFC and micro finance institutes widely spread in the country.
The banking sector of the country has 56 banking institutions which include public sector,
Islamic banks, foreign banks, development financial institution specialized banks and micro
finance institutions.
Bargaining power of suppliers
The supplier of banks is the people from who bank raise funds. So major sources funds come
from their customer who becomes the supplier in this case.
Bargaining power of the customer
The customer and the depositors have a high bargaining power in the markets. Any bank giving
the higher rate of interest would effects the large number of customer, because there are number
of banks operating in the market which offer similar services.
Threat from substitutes
There are number of substitutes in retail finance industry such as money leader NBFC micro
finance and also the insurance companies. Banks are seeing there competition rising from
unconventional companies. Markets like Pakistan customer have high propensity towards
switching to other substitutes.
Key success factor
Bank of Punjab announces Women Entrepreneur Financing Scheme
This March BOP familiarizes and project International Women's day, the merits of this scheme,
Bank of Punjab has launched the Women Entrepreneur's Finance Scheme (WEFS) a one of its
kind financing scheme. Through this scheme, Rs. 2 billion has been allocated for the
empowerment of women entrepreneurs, enabling them to launch businesses or expand their
operations across Punjab and established a stall at the Women's day function organized by the
Government of Punjab at A1 Hamra Cultural Complex, Qaddafi Stadium Lahore. Women had a
great response to the scheme, and took a keen interest in the merits and conditions of the facility.
Punjab Yellow cab schemes
Lahore (July 14, 2011) – Punjab cabinet which met on Thursday under the chairmanship of Chief
Minister Shahbaz Sharif, gave formal approval to the Yellow Cab Scheme under which 20,000
vehicles would be distributed. A forty percent quota has been allocated for southern Punjab
compared to its 31 percent population. BOP was in charge of that schemes and that allow the
people to take opportunity from that scheme. People of Punjab are has use this scheme to
promote themselves to own money for their self and for their family. With the help of this
scheme people are welling to get yellow cab and employee themselves.
EXTERNAL FACTOR EVALUATION
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing.
OPPURTUNITIES weight rating weight score
1. BOP support agriculture and industry sector. 0.2 4 0.8
2. BOP focus is on customer satisfaction. 0.12 3 0.36
3. Focus on e-banking. 0.1 2 0.2
4. Punjab schemes are supported by BOP. 0.16 4 0.64
5. Adopting new technology. 0.12 3 0.36
Threats
6. Economic growth slow. 0.1 3 0.3
7. Lacking of trust in BOP 0.07 1 0.07
8. Facing strong competitor. 0.13 3 0.39
Total 1 3.12
EFE matrix show that company is doing great in terms of getting benefit from opportunity and
trying to over come the threats.
Internal Factor Evaluation.
Internal Factor Evaluation (IFE) matrix method is a strategic-management tool often used for
assessment of current business conditions.
Strength weight rating total
BOP 51% share by the government of Punjab. 0.2 4 0.8
Able to swift business environment. 0.12 3 0.36
Bank work under (IRAF) questionnaire. 0.1 3 0.3
Fully committed to follower road map. 0.07 2 0.14
BOP work fairly with their customer. 0.14 3 0.42
Weakness
Loosing the customer trust due to scam. 0.1 2 0.2
Lacking of internal controls. 0.09 3 0.27
No Advertisement on electronic media. 0.08 4 0.32
The State Bank of Pakistan control is weak. 0.1 3 0.3
Total 1 3.11
Competitive profile matrix
BOP MCB UBL
Key success factors weight rating total rating total rating total
Advertising 0.2 1 0.2 2 0.4 4 0.8
Products 0.12 3 0.36 3 0.36 3 0.36
Management 0.13 3 0.39 4 0.52 4 0.52
Financial position 0.2 2 0.4 3 0.6 4 0.8
Customer loyalty 0.09 3 0.27 3 0.27 3 0.27
Market share 0.11 2 0.22 3 0.33 3 0.33
Growth 0.15 3 0.45 2 0.3 3 0.45
Total 1 2.29 2.78 3.53
As we can see in above matrix u can clearly see that BOP is at the lowest side reason for that is
due to the scam which has happened in the BOP. And UBL is bank which is doing great as
compare to the other bank.
SWOT MATRIX
Strength Weakness
1. BOP 51% share by the government of Punjab.
2. Able to swift business environment.
3. Bank work under (IRAF) questionnaire.
4. Fully committed to follower road map.
5. BOP work fairly with their customer.
1. Loosing the customer trust due to scam.
2. Lacking of internal controls3. No
advertisement on electronic media.
4. The State Bank of Pakistan control is weak
Opportunities OS OW1. BOP support
agriculture and industry sector.
2. BOP focus is on customer satisfaction.
3. Focus on e-banking.
4. Punjab schemes are supported by BOP.
5. Adopting new technology.
(S1,O1) since the bank of Punjab is hold by the government of Punjab and we all know Punjab is the agriculture land so different kind of finance package should be launch for the famers.(S5,O2) since bank of Punjab want to build customer relationship so they work hard and provide satisfaction to them
(O2,W1) BOP wants to build customer relationship but they are not able to do because of all the scam which has happened in the BOP have effect the reputation of the Bank.
Threats TS TW1. Economic growth
slow. 2. Lacking of trust
in BOP3. Facing strong
competitor
(T1,S2) BOP always swift with the business environment but the economic growth is slow not many new business are starting.
(T2,W1) people are not trusting the BOP and the reason for that is because there are huge scams in the BOP cause SBOP control is weak on BOP.
BCG Matrix
Relative market share position in the industry
High (1.0) medium (.50) low (0.0)
High (+20)
Industry sales
Growth rate
Medium (0)
Low (-20)
As we can see in BCG matrix we can see the BOP lies in I quadrant which is base on the market penetration, market development, product development.sin the BOP is the bank of Punjab now it is also opening outside the Punjab and lunching their product to different cities.
Grand Matrix
Rapid market growth
Quadrant II
BANK OF PUNJAB
Weak strong
Competition Competition
Position Position
BANK OF PUNJAB
Star question mark
Cash cow Dogs
Slow market growth
As we can see in grand matrix bank of Punjab lies in quadrant II which is totally base on the
market development, market penetration, product development, horizontal integration,
liquidation. BOP is will to expand in Pakistan. So these banks are opening in different country.
The space matrix
FP
Conservative 7 Aggressive
BANK OF PUNJAB 6
5
4
3
2
CP 1 IP
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1
-2
Defensive -3 Competitive
-4
-5
-6
-7
SP
As we can see in the above matrix you can see BOP is flowering conservative strategy. This is base on market penetration, market development, product development and related diversification.
The internal- external matrix
IFE total weight score
Strong (3 to 4) average (2 to 2.99) weak (1 to 1.99)
I II III
High (3 to 4)
BANK OF PUNJAB
EFE total weight score
IV V VI
Medium (2 to 2.99)
Low (1 to 1.99)
VII VIII IX
As we can see in internal- external matrix BOP lies in first quadrant. This have been done with the help of the sum of EFE and IFE model
Quantitative strategic planning matrix
Alternative strategy
SWOT SPACE BCG IE Grand STRATEGY
TOTAL
Backward integration
- - - 1 - 1
Forward integration
- - - 1 - 1
Horizontal integration
- - - 1 - 1
Market penetration
1 1 1 1 1 5
Market development
1 1 1 1 1 5
Diversification
- - 1 - -
Product development
1 1 1 - 1 4
liquidity - - - - 1 1
key factor
STRENGHT
1. BOP 51% share by the government of Punjab.
2. Able to swift business environment.3. Bank work under (IRAF) questionnaire.
4. Fully committed to follower road map.5. BOP work fairly with their customer
WEAKNESS
1. Loosing the customer trust due to scam.
2. Lacking of internal controls3. No advertisement on electronic media.4. The State Bank of Pakistan control is
weak
Total
Opportunities
1. BOP support agriculture and industry sector. 2. BOP focus is on customer satisfaction.3. Focus on e-banking.4. Punjab schemes are supported by BOP. 5. Adopting new technology.
Threats
1. Economic growth slow. 2. Lacking of trust in BOP3. Facing strong competitor
Total
Weight AS TAS AS TAS
0.2 3 0.6 3 0.6
0.12 - -0.1 - -
0.07 4 0.28 3 0.210.14 3 0.42 2 0.28
0.1 - -
0.09 - -0.08 - -0.1 3 0.3 4 0.4
1
0.2 4 0.8 3 0.6 0.12 - -0.1 3 0.3 4 0.40.16 2 0.32 1 0.160.12 - -
0.1 2 0.2 2 0.20.07 - -0.13 4 0.52 4 0.52
1 3.74 3.37
So from above matrix we can say that the BOP should focus more on market penetration. BOP is
one of the oldest bank of Pakistan so they should me different product which allow them to grow
in the market